Guarded optimism about the new Danish RPS

On May 28 the Danish parliament, Folketinget, spent its last day of work before the summer holidays voting on Minister of Energy and Environment Svend Auken's proposal to reform and liberalise the Danish electricity sector.
A broad majority voted in favour of the energy reform, which will have a significant influence on the wind power sector in Denmark.
The reform replaces the current support system based on fixed prices with a market based RPS "Renewable Portfolio System" or "Renewable Certificate System" (see news item from 10 March).
- The Danish wind turbine manufacturers face radically changed market conditions in Denmark, says Karl Gustav Nielsen, President of the Danish Wind Turbine Manufacturers Association, and continues:
- Naturally, we are facing great challenges but it will still be possible to earn a decent return on wind turbine investments under the new scheme. From 1 January 2000, the price turbine owners receive for their electricity will fluctuate in the range between DKK 0.43 and 0.60/kWh. Of course, much depends on which end of the scale electricity will be traded at.

Gradual transition
From January 2000, the present guaranteed price feed-in scheme that guarantees Danish producers of wind energy DKK 0.60/kWh electricity will be gradually abolished, and if everything progresses according to plans, a new system of trading green power certificates on a green power exchange will become reality.
For about a year the Netherlands have been operating a similar system.
However, the Dutch system is based on voluntary agreements between utilities and renewable energy producers rather than a binding quota established by the government, which will be the case in Denmark. Therefore, the two systems are not directly comparable.
A transitional system is meant to ensure that owners of existing wind turbines will still be able to earn a decent return on investments already undertaken. Furthermore, the reform secures that the change towards a market-based system will occur at a moderate pace.
Danish consumers will be obliged to purchase an increasing share of their electricity from renewable energy sources, thus creating a minimum level of demand for green certificates.
A quota has been laid down, which will double the share of electricity from renewable energy sources from the current level of 10% to 20% by the end of 2002.

Landed on our feet
While there is little doubt that the new RPS constitutes one of the most radical changes in the history of Danish wind energy, the country's manufacturers are guardedly optimistic about the future Danish market.
- Things did not look too good in the spring of 1999, but fortunately the politicians were accessible to the arguments made by our association and the wind turbine owners. The reform is a revolution and there are still many questions left unanswered, but we seem to have landed on our feet, says Karl Gustav Nielsen with reference to the transitional system.
The scheme guarantees Danes investing in wind turbines between now and 31 December 2002 at least DKK 0.43/kWh for a ten year period from the time of installation.
The Danish Energy Agency will spend the remaining part of 1999 assessing how trade in green certificates can be organised. It assumes that a well-functioning market for green certificates will be in place by 2003.
- Now that we know what is in store, it is of paramount importance to the Danish wind turbine manufacturers that the market be established as quickly as possible.
- I find it difficult to believe, however, that it will be technically possible to have a system ready by the end of 1999. Therefore, I anticipate that there will be a need for extending the transitional arrangement for existing turbines well into 2000, says Karl Gustav Nielsen.